I've had occasional setup problems with DCS too but they always turned out to be connection or track problems:
1. Make sure that the track section the engine is on when you try to add it is very clean; trying to add or even address an engine already in the system when it's sitting on dirty or defective track can be a nightmare.
2. Make sure that power from the transformer is connected to the TIU through the correct inputs and outputs - fixed not variable.
3. You might need to try connecting the handset to the TIU via a telephone cord rather than relying on the wireless connection.
4. Check which version of DCS the handset is - the splash screen should show if it's version 4 or something earlier.
5. If all else fails, hope that the author of the DCS Bible, Barry B., sees this post or try putting it on the DCS Control System Forum.